Smile Energy Private Limited vs Registrar Of Companies Orissa

[Arising out of order dated 01.03.2021 passed by the National Company Law Tribunal (Cuttack Bench, Cuttack) in CP (Appeal) No. 255/CB/2020]

IN THE MATTER OF: M/s. Smile Energy Private Limited, (Struck Off), CIN: U40100OR2007PTC009546 Having register office at: C/o Trarunshree Cotton Private Limited Komatalapeta, Rayagada, Odisha, Pin-765001 State of Odihsa Through its Director, Rangchand Appikonda, S/o Mr. A.Krupa Rao, Resident of 301, Mycons Acorpolish, Cyber, Cyber Hills Society Guttala, Begumpet, Madhapur, Telangana-500081. ....... Appellant. Versus

Registrar of Companies, Odisha, Having his Office at 3rd Floor, Corporate Bhawan, Plot No. 9(P), Sector: 1, CDA, Cuttack, Odisha-753014. ....... Respondent. Present: For Appellant: Mr. Basa Mithun Shashank and Mr. M.V. Mukunda, Advocates. For Respondent:- Mr. Kamal Kant Jha, Sr. Panel Counsel Govt. of India with Mr. Avinash Singh, Advocate for RoC. 2

JUDGMENT

(03rd March, 2023)

Justice Anant Bijay Singh;

The present Appeal under Section 421 of the Companies Act, 2013, has

been filed by the Appellant being aggrieved and dissatisfied by the order dated

01.03.2021 passed by the National Company Law Tribunal (Cuttack Bench,

Cuttack) in CP (Appeal) No. 255/CB/2020 whereby and whereunder appeal filed

by the Appellant for restoration of the name of the Company in the Register

maintained by the Registrar of Companies (RoC), NCT of Delhi and Haryana was

dismissed by the Tribunal.

2. The facts giving rise to this Appeal are as follows:

i) The company, M/s. Smile Energy Private Limited, was incorporated under

the Companies Act, 1956, on 24.11.2007. The main object of the company are

to carrying in the business to generate, receive, produce, improve, by, sell,

acquire, use, transit, accumulate, employ, distribute, develop, handle, protect,

supply and to act as agent, broker, representative, consultant or otherwise to

deal in electronic power in all its branches at such place or places as may be

permitted by appropriate authorities by establishment of thermal power plants,

hydraulic power plants, atomic power plants, wind power plants solar power

plants and other power plants based on any source of energy as may be

developed or invented in future, etc. The Appellant herein, was a Director and

Shareholder of the Company.

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ii) The Government of Orissa issued an internal letter on 02.02.2009 to one

of its departments stating that 3 MW SHEP lower Indra project was allotted to

the Appellant. On 16.02.2009, the Company entered into a Memorandum of

Understanding with the Government of Odisha on 16.02.2009 to establish a

Small Hydro Electric Project (3 MW) on River Indra near Village Dargaon in

Nuapada District, State of Odisha. On 30.11.2013, the Company entered into a

further MoU dated 30.11.2013 with the Government of Odisha, for establishment

of 4 MW (enhanced capacity) project in the same area.

iii) On 01.07.2014, the Office of Chief Engineer cum Chief Electrical Inspector

(Generation), Government of Odisha issued Office Memorandum dated

01.07.2014 according Techno Economic Clearance for the proposal of

establishing the project. The estimated project cost is Rs. 24.00 Crores. The

Company was required to obtain all necessary approvals and clearances within

twelve months of the sanction. Further, on 15.05.2017 the Company issued

letter to the Executive Engineer, Electricity Department, Nuapada District,

Odisha, requesting him to provide the exact coordinates of the substation at

Khariar so that the company may conduct a survey and plan the power

evacuation from the proposed Small Hydro Electric Project (SHEP) to the sub-

station. Thereafter, on 19.06.2017, seeking allotment of land to the extent of

10.3 Acres for various components of the project.

iv) On 08.10.2017, the company issued letter to the Chief General Manager

(P) GRIDCO, Janpath, Bhubaneswar seeking to enter into a Power Purchase

Company Appeal (AT) No. 75 of 2021 4

Agreement in respect of the Small Hydro Electric Project being constructed by

the Company. On 17.10.2017, the company issued letter to the Executive

Engineer, WESCO, requesting him to inform the company of the nearest 33/11

KV substation to 4 MW SHEP proposed to be constructed by the company.

Thereafter, on 01.11.2017, the company issued letter to the Engineer-in-Charge

(EIC), cum PCEI, Unit V, Power House Square, Odisha, requesting allotment of

law in order to do the needful in furtherance of the power project.

v) In 2017, the Company, at its Annual General Meeting, approved of its

Balance Sheets, as well as the Director's Report for the year 2016-17. The

company reported a loss of Rs. 4,96,570/- for the Financial Year ending on

31.03.2017. Thereafter, on 08.01.2018, the company issued letter to the Chief

General Manager, GIRDCO, requesting him to expedite the process of issuing a

Power Purchase Agreement in order to complete the process by 30.01.2018, so

as to meet the deadlines given by the Government of Odisha. The company

applied for all the required sanctions, the Government of Odisha was unable to

complete the acquisition of the land on which the project was to be completed.

However, from time to time, the Company furnished Bank Guarantees required

to execute the project.

vi) In 2018, the company, at its Annual General Meeting, approved of its

Balance Sheets, as well as the Director's Report for the year 2017-18. The

company reported a loss of Rs. 26,699/- for the Financial Year ending on

31.03.2018. Further, the Company, at its Annual General Meeting, approved of

Company Appeal (AT) No. 75 of 2021 5

its 2018-19 Balance Sheets, as well as the Director's Report. The company

reported a loss of Rs. 8,870/- for the Financial Year ending on 31.03.2019.

vii) The Registrar of Companies issued Gazette Notification dated 24.10.2019

striking off the Company from the Register of Companies as per Section 248(5)

of the Companies Act, 2013. The Appellant herein checked the website of the

Ministry of Corporate Affairs Portal for filing of certain statutory documents and

learnt that the status of the Company was 'Strike Off'. The Company is still a

going concern and has been consistently maintaining audited financial

statements, meeting all the statutory requirements. The Engineer-in-Chief,

Government of Odisha issued letter dated 03.01.2020 to the EIC(P&D), West

Resources, Odisha, requesting him to allot 10.3 Acres of land in Badamaheswar

Village for the construction of different components of the project. Further, the

Government of Odisha by letter dated 28.08.2020, requested the company to

extend its Bank Guarantee, as per the terms of the MoU. On 24.09.2020, the

company got extended Bank Guarantee for Rs. 4,00,000/- from 30.08.2020 to

30.08.2023 and the Bank Guarantee was to remain in force till 30.08.2023.

Therefore, the company has been conducting continuous business with the

Government of Odisha.

viii) Thereafter, being aggrieved by the notice of the Respondent No. 1 of

"Striking Off", the Appellant approached the Tribunal under Section 252 of the

Companies Act, 2013 for revival of the Appellant Company and after hearing

Company Appeal (AT) No. 75 of 2021 6

both the parties, the Tribunal passed the order impugned which led to filing of

this Appeal.

3. The Ld. Counsel for the Appellants during the course of argument and

grounds mentioned in the memo of appeal, submitted that the Company is a

going concern, which has been awarded a Memorandum of Understanding (For

short "MoU") by the Government of Odisha. As per the terms of the MoU, the

company is to set up a 4 MW Small Hydro Electric Project in Nuapada, Odisha.

Though the company has received all the required sanctions, the Government of

Odisha is yet to allot the land for the project. Therefore, the company is not a

shell company, but is a going concern, awaiting the allotment of land from the

Government.

4. It is further submitted that Section 248(1) of the Companies Act, 2013,

enjoins the Registrar of Companies to serve notices on all of the Directors of the

company. This has not been complied with. This Tribunal has repeatedly held

that when notices are not served on the Directors of the company which is sought

to be struck off, the striking off must be set aside, held in the case of "Calcutta

Rubber Factory v. Registrar of Companies, (2019 SCC Online NCLAT 851)". The

Company issued letters form 2007 till the date of striking off, in order to be able

to conduct the business that the company was incorporated for. The mere lack

of income or lack of profits cannot mean that the company is a shell company.

The finding of the Tribunal is completely erroneous in this regard, as the

company was conducting its business through issuing various letters to the

Company Appeal (AT) No. 75 of 2021 7

relevant authorities in order to be able to begin construction and necessary

activities on the Hydro Electric Project.

5. It is further submitted that the company and its shareholders are ready

and willing to invest Crores of Rupees in the construction of the dam, which is

important for the development of Nuapada District, and for the national

development. The company will produce renewable electricity connected to the

national grid in an environmentally friendly manner. Therefore, it is in the

interests of the society that the company is allowed to function and conduct

business. Further, the Company and the Appellant herein did not receive any

notice under Section 248(1) of the Act. Such a notice is mandatory in order for

the company to be struck off from the Register of Companies, therefore, the

striking off is bad in law for the failure to follow due process. The company was

unable to upload its Annual Reports with the Registrar of Companies due to the

suspension of the Appellant's DIN between 2016 and 2019. This was only later

investigated by the Appellant, and the Appellant has approached the Hon'ble

High Court to defreeze the DIN. Therefore, the inability of updating the Annual

Reports does not amount to a reasonable cause to believe that the Company is

not carrying out any business.

6. The NCLT failed to peruse and examine the various documents providing

that the company had been conducting business. The finding of the NCLT that

the company is merely a shell company is ex facie erroneous, as the company

has been awaiting allotment of land for the construction of the project awarded

Company Appeal (AT) No. 75 of 2021 8

to it by the Government of Odisha. The company repeatedly renewed Bank

Guarantees for the project awarded to it, as has a long-term loan of Rs.

29,96,000/-. Therefore, the company's assets and liabilities are also required to

be analysed by the NCLT, which had not been done before. Therefore, the order

of the NCLT ought to be set aside by this Tribunal.

7. On the other hand, the Ld. Counsel for the Respondent/Registrar of

Companies during the course of argument and his Reply Affidavit submitted

that the Company, Ms. Smile Energy Pvt. Ltd. was incorporated on 24.09.2007,

but due to failure in filing of its statutory returns for a continuous period of more

than two years, the name of the company was considered for striking off by the

Respondent in a suo motu action under the provisions of Section 248(1) (c) of

the Act and also in pursuance of the circulars issued by the ministry of Corporate

Affairs, Govt. of India, New Delhi from time to time. The basis of striking off the

name of the company was the continuous non-filing of the statutory returns i.e.

financial statements and Annual Returns since the financial year ending

31.03.2017 onwards (which are required to be filed under the Act) and it was

believed that the company was not carrying on any business or operation for a

period of two immediately preceding financial years as the company has not

made any application within such period for obtaining the status of a dormant

company under Section 455, prior to its struck off.

8. It is further submitted that the Respondent issued Notice STK-1 i.e. a show

cause notice under Section 248(1)(c) of the Act, to the Appellant company

Company Appeal (AT) No. 75 of 2021 9

enquiring whether the said company was carrying on any business or was in

operation, but no reply to the said show cause notice was received by the

Respondent's office. Subsequently, the Respondent's office published in the

Official Gazette and Newspaper for the information of the general public

regarding striking off the name of the company in Form No. STK-5/5A. The said

notice is issued as public notice not only to the company and the directors of the

company but also to all stakeholders concerned so as to receive their objections,

if any, to the said intention of the Registrar to remove the name of the company

from the Register. Finally, after the expiry of the time mentioned in the said

notice, the name of the company was struck off from the Register maintained by

the Respondent and the name of the company was published in Form STK-7 in

the Official Gazette dated 22.07.2017 and on the publication of such notice in

the official Gazette the company stood dissolved on and from 24.10.2019.

Further, the instant appeal is liable to be dismissed with costs because the

appellant has not been able to prove that the appellant company was a going

concern and was having any business operations at the relevant time.

9. After hearing the parties, going through the pleadings made on behalf of

the parties and in view of the fact that the Audited Balance sheets from Financial

Year 2017-18 to 2018-19 as also the company repeatedly renewed Bank

Guarantees for the project awarded to it by the Government of Odisha, as has a

long-term loan of Rs. 29,96,000/- shows that the Appellant Company is having

substantial movable as well as immovable assets. Therefore, it cannot be said

Company Appeal (AT) No. 75 of 2021 10

that the Appellant Company is not carrying on any business or operations.

Hence, we are of the view that the order passed by the National Company Law

Tribunal (Cuttack Bench, Cuttack) as well as Registrar of Companies, Odisha is

not sustainable in law.

10. In view of the aforenoted, we set aside the impugned order dated

01.03.2021 passed by the National Company Law Tribunal (Cuttack Bench,

Cuttack) in CP (Appeal) No. 255/CB/2020. The name of the Company be restored

to the Register of Companies subject to the following compliances.

i) Appellant shall pay costs of Rs. 3,00,000/- (Rupees Three

Lakhs) to the Registrar of Companies, Odisha within eight (8)

weeks from the passing of this Judgment.

ii) After restoration of the Company's name in the Register

maintained by the Registrar of Companies, the Company shall

file all their Annual Returns and Balance Sheets. The Company

shall also pay requisite charges/fee as well as late fee/charges

as applicable.

iii) Inspite of present orders, Registrar of Companies will be free to

take any other steps punitive or otherwise under the

Companies Act, 2013 for non-filing/late filing of statutory

returns/documents against the Company and Directors.

The instant Appeal is allowed to the above extent.

Company Appeal (AT) No. 75 of 2021 11

11. Registry to upload the Judgment on the website of this Appellate Tribunal

and send the copy of this Judgment to the National Company Law Tribunal

(Cuttack Bench, Cuttack), forthwith.

[Justice Anant Bijay Singh] Member (Judicial)

[Mr. Kanthi Narahari] Member (Technical)

New Delhi 03rd March, 2023 Ram Nath.

Company Appeal (AT) No. 75 of 2021